Seller Financing Explained for FedEx Routes
Many people believe that the only place to secure a loan for FedEx routes is with a bank. However, some banks are hesitant to issue funding for businesses that offer up a lack of physical collateral. Despite being wildly profitable, your bank might balk when asked to provide capital for your route-based business.
With the FedEx ground ISP agreement calling for a minimum of 5 routes or 500 deliveries for owners, it is imperative to have funds readily available in case something goes wrong. Emergency funding needs vary by operator but usually ranges between $5,000-$150,000.
If you are wondering how to buy FedEx routes, it starts with capital! Since FedEx supplies a steady stream of customers, many route owners are willing to take on the responsibility of financing a route that they are selling. This is a testament to their continued belief in the business model, despite their desire to sell the route(s). The fact that FedEx routes provide immediate cash flow also mitigates the risk of holding back a note to provide financing.
When FedEx route sellers get involved in financing, you will often find rates to be in the high single-digits with a term between 3 – 5 years. A security agreement will often use the buyer’s business assets as collateral to back the seller’s loan.
There are many ways to finance a FedEx route, including but not limited to:
Loan against retirement funds (401K, Roth IRA, etc.)
Leveraging stocks and bonds
Home equity loan or line of credit
Personal bank loan
SBA (Small Business Administration) loan
Friends and family
Cash advance companies often have quick approval and funding times, usually only taking several business days for FedEx routes or other businesses. However, this expediency often comes at a price: higher interest rates.
SBA loans can be a great option, especially when hard assets, such as a truck fleet and other physical elements are involved. While this type of loan for a FedEx route can be a challenge, it is not impossible.
Of course, the more FedEx routes you own, the more money you can potentially make. Being an independent contractor might make it more difficult to secure a loan initially, but the backing of the trustworthy and successful FedEx name puts you on the road to be a successful independent contractor.
Whether you are searching for a FedEx home delivery route for sale or a line haul route, always do your due diligence and rely on a knowledgeable broker.